11.3 Key CGL Exclusions and Endorsements
Key Takeaways
- Coverage A exclusions push business risk back to the insured: damage to your product, damage to your work, and impaired property are not covered, though the CGL still covers injury or other-property damage those defects cause.
- The 'Damage to Your Work' exclusion has a subcontractor carve-back that restores coverage for defective completed-operations work performed by a subcontractor.
- The absolute pollution exclusion removes pollutant release and government-ordered cleanup costs, forcing genuine environmental exposures onto a separate Pollution or Contractors Pollution Liability policy.
- The recall (sistership) exclusion bars the cost to recall, repair, or withdraw a defective product, and the liquor liability exclusion applies only to those in the business of serving alcohol (host liquor remains covered).
- Endorsements reshape the CGL: CG 20 10/CG 20 37 add insureds, CG 21 47 is the employment-related practices exclusion, CG 25 03 is the per-project aggregate, and primary-and-noncontributory plus waiver-of-subrogation wording reorder priority and recovery rights.
Reading the Exclusions in Coverage A
The Coverage A (Bodily Injury and Property Damage) insuring agreement of ISO CG 00 01 is followed by a long list of exclusions (lettered a through n). The exam concentrates on a handful that consistently remove or limit coverage and that can be bought back by endorsement.
- (a) Expected or Intended Injury - harm the insured expected or intended is not covered; reasonable-force defense of persons or property is excepted.
- (b) Contractual Liability - liability assumed by contract is excluded unless it is an insured contract (leases, sidetrack agreements, etc.).
- (c) Liquor Liability - applies only to those in the business of serving alcohol; social-host situations are typically still covered.
- (g) Aircraft, Auto, Watercraft - bodily injury and property damage from owned autos and aircraft belong on other policies.
The "Your Work / Your Product" Family
Several exclusions push business-risk losses back onto the insured rather than the insurer:
- Damage to Your Product - the cost of the defective product itself is not covered (the insured should not insure its own quality control).
- Damage to Your Work - faulty workmanship in completed operations is excluded, with a carve-back when the work was performed by a subcontractor.
- Damage to Impaired Property - loss of use of non-defective property because your work is faulty, with no physical damage, is excluded.
- Recall (Sistership) Exclusion - the cost to recall, repair, or withdraw a defective product is excluded.
Exception to remember: the CGL does cover damage your product or work causes to OTHER property or to persons; it just refuses to pay to fix the product itself.
Pollution and the Absolute Exclusion
The absolute pollution exclusion removes BI/PD arising from the discharge, dispersal, or escape of pollutants at or from premises the insured owns or operates, and from cleanup costs demanded by a government. Coverage for genuine pollution exposure must be added through a separate Pollution Liability policy or a Contractors Pollution Liability endorsement. A narrow hostile-fire exception can apply when pollutants are released by an out-of-control fire.
Common worked scenario: a dry cleaner's solvent leaks into soil. The unendorsed CGL excludes both the third-party BI/PD and the state-ordered cleanup, so a stand-alone environmental policy is required.
Key CGL Exclusions, Endorsements, and Worked Traps
The CGL contains roughly a dozen Coverage A exclusions that the exam revisits constantly. The most tested are the pollution exclusion (sudden and gradual release of pollutants), the aircraft/auto/watercraft exclusion (steered to PAP/BAP/aviation/marine), the workers compensation/employers liability exclusion, the employment-related practices exclusion (steered to EPLI), and the "your product / your work / impaired property" exclusions that bar coverage for the insured's own faulty work.
| Exclusion | What it removes | Where the risk goes |
|---|---|---|
| Pollution | Pollutant release/cleanup | Environmental/pollution policy |
| Auto/aircraft/watercraft | Their ownership/use | BAP / aviation / ocean marine |
| Your product / your work | Damage to the insured's own work | Warranty / surety, not CGL |
| Liquor liability | Serving/furnishing alcohol | Liquor liability policy/endorsement |
| Employers liability | Injury to employees | Workers comp Part Two |
Endorsements adjust the grant: CG 20 10/20 37 add insureds; CG 21 47 is the employment-related practices exclusion; CG 25 03 is the designated-construction-project aggregate; and primary and noncontributory wording is added so a client's policy does not share with the named insured's.
Worked scenario: A bar patron is over-served and injures a third party. The bar's CGL denies the claim under the liquor liability exclusion because the bar is in the business of serving alcohol; the claim belongs on a liquor liability policy. By contrast, a manufacturing company that hosts a one-time office party may still have host liquor coverage under its CGL, because it is not in the alcohol business — a distinction the exam loves to test.
A general contractor's completed building develops water damage caused entirely by a roofing SUBCONTRACTOR's faulty work. Under the standard CGL 'Damage to Your Work' exclusion, how is this treated?
Common Endorsements That Modify the CGL
Producers tailor the CGL with endorsements that broaden, restrict, or share coverage:
| Endorsement | Effect |
|---|---|
| Additional Insured (e.g., CG 20 10 / CG 20 37) | Extends coverage to another party such as a landlord or project owner |
| Primary and Noncontributory | Makes the insured's policy pay first without sharing with the additional insured's own coverage |
| Waiver of Subrogation | Surrenders the insurer's recovery rights against a named party |
| Liquor Liability | Buys back coverage for businesses serving alcohol |
| Per-Project / Per-Location Aggregate | Provides a fresh aggregate for each job site or location |
The per-project aggregate endorsement is heavily tested: it gives each construction project its own General Aggregate, so one bad job cannot exhaust the limit protecting all other jobs.
A manufacturer's product fails and the company spends $300,000 recalling and replacing the units from store shelves before anyone is injured. Under the unendorsed CGL, is the recall cost covered?
Key Takeaways
- Coverage A exclusions push business risk back to the insured: damage to your product, your work, and impaired property are not covered.
- The 'Damage to Your Work' exclusion has a subcontractor carve-back, restoring coverage for defective work done by subs.
- The absolute pollution exclusion forces genuine environmental exposures onto separate pollution policies.
- The recall (sistership) exclusion bars the cost to withdraw or replace a defective product.
- Endorsements such as Additional Insured, Primary and Noncontributory, Waiver of Subrogation, and Per-Project Aggregate reshape how and to whom the CGL responds.
CGL exclusions mostly remove uninsurable business risk - the insured's own product, workmanship, and impaired property - while still covering injury and other-property damage those defects cause. Pollution and recall costs require separate solutions, and a small set of endorsements lets producers extend coverage to other parties, reorder priority, and protect each project's aggregate.